5.) PROOF OF OWNERSHIP OF SHARES Nautical Canning Corp. vs. Yuma G.R. No.

164588; October 19, 2005 FACTS: Yumul was appointed Chief Operating Officer/General Manager of Nautica. First Dominion Prime Holdings, Inc. , Nauticas parent company, through its Chairman Alvin Y. Dee, granted Yumul an Option to Purchase up to 15% of the total stocks it subscribed from Nautica. A Deed of Trust and Assignment was executed between First Dominion Prime H o l d i n g s , I n c . a n d Y u m u l w h e r e b y t h e f o r m e r a s s i g n e d 14, 999 of its subscribed shares in Nautica to the latter. After Yumuls resignation from Nautica, he wrote a letter to Dee requesting the latter to formalize his offer to b u y Y u m u l s 1 5 % s h a r e i n N a u t i c a a n d d e m a n d i n g t h e issuance of the corresponding certificate of shares in his name should Dee refuse to buy the same. Dee denied the r e q u e s t c l a i m i n g t h a t Y u m u l w a s n o t a s t o c k h o l d e r o f N a u t i c a . Y u m u l r e q u e s t e d t h a t t h e D e e d o f T r u s t a n d Assignment be recorded in the Stock and Transfer Book of Nautica, and that he, as a stockholder, is allowed to inspect its books and records. Yumuls requests were denied. Yumul filed a petition for mandamus praying that the Deed of Trust and Assignment be recorded in the Stock and Transfer Book of Nautica and that the certificate of stocks corresponding thereto be issued in his name. ISSUE: WON Yumul is a stockholder. (Proof of Ownership of Shares) HELD: YES. Indeed, it is possible for a business to be wholly owned by one individual. The validity of its incorporation is not affected when such individual gives nominal ownership o f o n l y o n e s h a r e o f s t o c k t o e a c h o f t h e o t h e r f o u r incorporators. This is not necessaril y illegal. But, this is valid only between or among the incorporators privy to the agreement. It does bind the corporation which, at the time t h e a g r e e m e n t i s m a d e , w a s n o n - e x i s t e n t . T h u s , incorporators continue to be stockholders of a corporation unless, subsequent to the incorporation, they have validly transferred their subscriptions to the real parties in interest. A transfer of shares of stock not recorded in the stock and transfer book of the corporation is non-existent as far as the corporation is concerned. As between the corporation on one hand, and its shareholders and third persons on the other, the corporation looks only to its books for the purpose of determining who its shareholders are. It is only when the transfer has been recorded in the stock and transfer book that a corporation may rightfully regard the transferee as one of its stockholders. From this ti me, the consequent obligation on the part of the corporation to recognize such rights as it is mandated by law to recognize arises